The Big Land Debate!

The Narendra Modi led government wants to amend the 2013 land law to allow several categories of projects exemption from having to seek consent and from having to do a social impact assessment. The proposed exemption list includes defence production, rural infrastructure, affordable housing and industrial corridors. The government also proposes to keep open-ended the return of unutilised land. These and other amendments were passed by the Lok Sabha but the Rajya Sabha referred the bill to a joint committee. With parliamentary approval pending these changes to the land law have been effected by 3 subsequent ordinances. In this special episode of The Firm from Bengaluru, CNBC TV18’s Menaka Doshi is joined by Prof Narendar Pani of the National Institute of Advanced Studies, Pavan Srinath of the Takshashila Institution and Senior Counsels K Raghavan and Aditya Sondhi in ‘The Big Land Debate'!

Raghavan: Let us look at the object of this new law. The object of the new law as we have seen, preamble to the statute is that it should be transparent, make it fairer to the land owner and make it easier for land acquisition. These were absent in the 1894 Act. My view is that by making amendments to the 2013 law, we are putting the cup back.

Sondhi: Chapter II and III which deal with the social impact assessment and the exclusion of acquisition of multi-crop fertile land are at the very heart of this new law and having introduced it after a lot of contemplation to now try and exempt these or exclude these in a wide array of proposed acquisitions as the ordinance now seeks to do, strikes at the very heart of the old law. It is morally wrong, I think. It also does away with the very deep rooted purpose of not only providing compensation for land losers but also to assess the impact that it has on society.

Pani: The entire strategy including the 2013 act is fundamentally flawed, it is fatally flawed because it is trying to use real estate values to overcome a major challenge in development, the issue is today we have more than half your population dependent on agriculture and agriculture accounts for less than 15 percent of your gross domestic product (GDP) and you are trying to bridge that gap by just saying I will give you four times the market value of land. That number will not work for both sides because even if I take four times today, I know tomorrow it will be worth more and it will not work for the industry because it simply makes it uncompetitive and then the current ordinance, which tries to say that okay we will step in and withdraw that, that doesn’t help either because the farming community is deeply suspicious of industry taking over land claiming it will go in for manufacturing and ending up with sheer real estate where any number of projects in Bangalore which started off as industries and are today real estate project, the entire Rajaji Nagar Industrial Estate if you like, is full of marriage halls. The entire process, that credibility and the credibility is not helped by either of the ordinances. The first ordinance talks about changing private company to private entity. Why? Is it a private entity -- don’t you need to be a company if you are going to manufacture something?

The second or 2015 ordinance goes a step further and says that I will declare land one kilometre on either side of the main road as one of the industrial corridors. Why should industrial corridor be on the main road? That is prime real estate property! The real estate intentions of this ordinance are becoming clearer day-by-day.

Doshi: Then what is the solution?

Pani: The solution has to be in terms of giving farmers a stake in industrial development, you have the national investment in manufacturing zones, convert them into some kind of public sector company in which you give shares to farmers, get the land on that for 99 year leases, don’t give it over so people can make real estate money out of it. If they don’t produce for five years, take it back and give it to someone else and the profits of that can be given to the farmers.

Sondhi: What Professor Pani is suggesting is sort of a paradigm shift but what I am saying is that when the 2013 act was formulated, there was a lot of thought that went into it and what we are doing now is a sort of a volte face. The real problem with that act for industry was the market value. Even though professor says that four times is illusory but four times is also a lot.

Doshi: In rural markets where transactions are not very frequent and therefore the benchmark in itself could be flawed, four times may or may not mean anything if you look at the future value of that land let us say three, five or ten years from now.

Sondhi: I will tell you what has been happening. One of the criteria to determine market value is the existence of a sale deed valuation in the proximity. So, the moment some neighbours were getting wind of the fact that there is an acquisition on the cards, there would be these small parcels of land that would be part of sham sale deeds if you will marked up at a very high price, then that sets the benchmark. So, there is a lot of activism if you will on both sides. So, what the government faced as a roadblock according to me was the simple, the economics of it, that the cost of acquiring land was too high. However, they haven’t touched that part. What they have touched now is the social impact assessment which is more a function of time.

Doshi: And the consent which is also a function of time and a function of actually allowing for that sale to happen. You get to the price only if you get the consent and I think that is where they have struck, at the very root of the entire process.

Sondhi: Worst of all it is being done through an ordinance.

Srinath: However, I think the challenge is exactly what you say. Land markets are not liberal in India. The value of land accrues to the person who can change the land use from agriculture to something else rather than the person who actually owns the land. So, my concern is that we are having this entire debate on land acquisition which is the involuntary transfer of land from an owner or a farmer to someone else while we are not talking about the larger context of are we really giving property rights to people and are we establishing title reforms and liberalising these land markets. So, even four times the agricultural value of the land is really not that much when someone can change that land use to industry or something else and that gain might be a windfall of 10-fold or 20-fold sometimes.

Pani: My only complaint is that why should you take over land completely. You are saying it is for an industrial purpose, why do you do it in a way that allows them to convert it into real estate. That as a safeguard you definitely need. It is not as if you are going to end up with industry, in fact, if you look at what is happening to manufacturing in India, you are encouraging industry to move from manufacturing to real estate.

Raghavan: You are right, we should not permit misuse. However, to say that a part of the profit of the enterprise should go to the farmer from whom the land has been acquired, respectfully I think is utopia.

Doshi: In many other countries we have seen the forcible acquisition of land. The US is no moral example by any stand. In India where we desperately need development, where we desperately need industry, where we desperately need employment for some 200 million youth that are going to hit our employment markets in the next decade or so where are those employment opportunities going to come from, if business is not allowed to put up factories?

Raghavan: The pattern that is adapted in a capitalist society like the United States, may not work in a country like ours where a large number of people, the majority of the population are still agrarian. So, we will not be able to adapt the eminent domain concept as it exists in United States where there is hardly a chance for challenge to an acquisition. However, here the whole problem is that public purpose is a concept which is essential in land acquisition is misused.

Doshi: How many of you have truly believe that the proposed amendments as well as the ordinances which follow that line of thought are actually anti-farmer and pro-industry? Is that most of the crowd?

(Most of the audience raises hands)

Doshi: So now tell me where will industry setup?

Audience1: We need to understand that what is the role of state in forceful acquisition and this is all the more important question in India’s perspective, because the kind of land records we have. The question over title is a big question here so that is the reason why state needs to intervene. Given the condition of India and given the kind of population and demography we have, we need lot of employment; that is not going to happen through agriculture. So, government has to support industry in some sense. We need to have checks and balances which I think this ordinance has. We have rehabilitation and resettlement (R&R) provisions in this act so it takes care of that.

Audience2: I think the ordinance if passed essentially legalises displacement in a country where millions of people have been displaced in the name of development. Also, I would like to bring in the case of Adivasis for whom even if they are resettled, their community integration as well as their relationship with the ecosystem is completely lost. So, in that case there identity, their sustenance will not be the same anymore.

Doshi: So you are opposed to the amendments as well as the ordinance?

Audience2: Yes.

Doshi: Aditya said that he is as pained by the contents of the amendments as by the process of the continuous repromulgation of ordinances to be allowing for these amendments to survive even though the bill has not made it through the Rajya Sabha. But previous governments have done this as well.

Raghavan: There are two ways of looking at it. One is from the constitutional point of view, the other is proprietary point of view. Constitution does not say that an ordinance cannot be repromulgated. So, if you ask me is it constitutionally right to have an ordinance of an ordinance, the answer is yes. Is there a bar to a promulgation of an ordinance where the bill is now being scrutinised by a committee of the parliament the answer is no, there is no bar. But is it the appropriate way of doing things in a democracy? That is the major question.

Doshi: But if you were a corporation and you wanted to acquire land for a project you thought that you would do it under the 2013 act then a government came in and said we want to move amendments to that act and in the meantime we are promulgating this ordinance. You stop the process, the bill won't make any progress in parliament, the ordinance is about to lapse, what do you do? So, you hope that they will repromulgate it. In some sense the continuity, while it may not be acceptable or appropriate is also necessary for those who are in the business of doing business.

Srinath: Principle question is that of utility. Are these ordinances really making it more business friendly and the answer is no. If there is uncertainty involved that the eventual law maybe even a little bit different from this ordinance that lasts for another six months or so then you will not have businesses investing and taking the kind of decisions the government wants them to take. Even while we are debating the constitutionality and the propriety, whether it will actually work and be effective in attracting investment still remains a big question.

Sondhi: In defence of the government, may I say that probably the 2013 act also in some ways went too far. It can be accused of being slightly populist.

Doshi: You are arguing this both ways…

Sondhi: No, I am saying this, I am saying the act could be accused of being populist but having being duly enacted I am not at all comfortable in the manner in which it has been tinkered with and of course there is no prohibition on repromulgation of ordinances but the point remains that the constitution says that the ordinance can only be passed when there is an immediate need for it. Now that immediacy cannot continue ad nauseam, number one.

Secondly, the Supreme Court in a judgement has said we have to beware of ‘Ordinance Raj’ in India where it struck down a repromulgation of ordinances in Bihar over a period of something like 24 years. Of course, that is extreme but what I am saying is there is a lot to be said about the manner in which ordinances are used and promulgated and repromulgated.

Doshi: Who do you point to? Previous governments have done so themselves. For instance the previous UPA government, I remember, the SEBI amendment bill they had to repromulgate three times or something like that because parliament wouldn't function.

Pani: This is not a problem of government, this is a much greater problem of 60 percent of your population having to be convinced about that they will have a stake in the way the country is going and each time you promulgate an ordinance, you are losing credibility with the farmers. It is looking as if you are just going to do anything when you are in power and next government will come and do the same thing and that is not going to help. You cannot develop a country with 50-60 percent of your population being left out.

Audience 3: Mr Aditya just gave an example of Bihar. That was the case of DC Wadhwa vs State of Bihar, where the court have struck down the repromulgation of states and of the ordinances and have clearly mentioned that executive cannot take over any legislative function. This is what exactly the government have been subsequently doing. Given that the view is very clear that it has no constitutional standing, how can we not have any sort of checks and balances to stop any such functioning?

Raghavan: There are checks and balances. The checks and balances is that you can promulgate an ordinance when the parliament is not in session and the moment the parliament is convened you have to place it and if it not passed it lapses. So, that is the checks and balances.

Doshi: So we are agreeing that the repromulgation of ordinances is not the most desirable way to go about legislation but in this case there is nothing anybody can do about it because the government won't listen.

Srinath: The sort of positive that has come out of this which is that because of the dysfunction that is there at the parliament under the centre, more and more legislation seems to be pushed down to the states and the states now seem to be effectively having more of a say when it comes to even concurrent list subjects.

Raghavan: Don't you think that it is a good move considering that we are not a unitary state, we are not even a federal state. We are somewhere a mix of unitary and federal state where we have three lists in the constitution and as we all know land acquisition comes in the concurrent list. Who knows best whether the social impact of an acquisition is beneficial or not beneficial. Is it not the person at ground zero, so don't you think that we should leave the states to do what they think is right.

Doshi: So, you are in favour of the most recent suggestion or proposal by the government that allow for the states to enact their own laws?

Raghavan: Yes, I am.

Doshi: Then I have a follow up question to that which applies to everybody on the panel. Can the state enact a law that dilutes the provisions of the 2013 act?

Srinath: Let us look at what happened with Rajasthan and the labour law reforms that happened in the Vasundhara Raje government. States can do lots of things but you need a presidential signature at some level which is essentially some sort of oversight by the union government. So, they get to play a veto if they want to.

Raghavan: Provided the state law is inconsistent with the central law and always the question is - is it inconsistent or is it supplementary, is it complimentary, so that is a big debate.

Sondhi: And that then becomes a question for the courts to decide.

Doshi: So how would you define inconsistency?

Sondhi: In principle once in a concurrent list matter if the union has already made the law and the state is proceeding to also make a law which is inconsistent with the central act then the presidential assent is required.

Doshi: Explain inconsistent to me. If the state law follows the 2013 Act provisions would it be deemed inconsistent with what the ordinance suggests or the proposed amendments suggest or if it follows the ordinance exemption list?

Pani: I would check whether there is another option that is suppose you decide to revise the investment manufacturing zones, in a way that gives the status to the farmers, gives access to the farmers, it can leave the acquisition law as it was. However, if the farmers are willing to give up their land for that purpose, the whole process goes much more smoothly.

Srinath: Absolutely.

Doshi: You are saying we don’t even need to change state laws?

Pani: You might need a new law about what are you going to do with the investments.

Doshi: However your proposals for the National Industrial Manufacturing Zones (NIMZ) in fact they have become public sector units, that they are not private because we have seen under the SEZ policy that then it becomes a private land grab process.

Pani: This is a public sector unit in which everybody whose land you have taken gets a share. So, if that makes a profit in future they keep getting a share.

Doshi: The NIMZ policy is articulated by the previous government… is very different; it is a whole different world.

Pani: If you don’t want to use that word, in fact they cannot use that because that is national but if you wanted a state level initiative of the same kind it can be done with all these connections- to the farmers, giving them a sense and that can leave this Land Acquisition Bill apart.

Doshi: The legal issues of states legislating their own land laws, would it have to be similar to the 2013 Act, would it have to be similar to the ordinance or the proposed amendments, how much leeway do states have?

Raghavan: The states have full leeway and if it is inconsistent whether it be with the original stature or with the amendment because if the states are given the power under the ordinance, it means it relates to the entire 2013 Act. So, if the states enact a law which is inconsistent with the original 2013 Act or enact a law which is inconsistent with ordinance then the only requirement under the constitution is that you should get the presidential assent. So the states have the power to frame a law or amend the 2013 Act, provided a provision which is inconsistent with what is contained in the 2013 Act also.

Sondhi: In fact the old law also had a series of state amendments to it. Even now a lot of acquisition takes place at the state level under the special enactments – Karnataka Industrial Areas Development Board (KIADB), the Bangalore Development Authority (BDA) Act, the Karnataka Housing Board Act and similar acts are enforced in different states. Very rarely do you find acquisitions except, say national highways and so on, not often do you find a pan India sort of acquisition taking place. More often than not, acquisitions are state centric. So, subject to presidential assent as Mr. Raghavan said, the states do have a freehand.

Doshi: Is that a superb political ploy by the current dispensation to say, go ahead and legislate what you want to in the hope that at least the BJP ruled states will then get the leeway to move on the grounds that the center wants. If the other states don’t follow they will become uncompetitive, industry will not go and setup there, so in effect this is a superb political ploy to do what parliament is not allowing them to do.

Raghavan: Political ploy maybe a strong expression, but a superb practical solution.

Doshi: However you should not be delighted at all because it will allow them to then implement what you were opposed to at the very beginning.

Raghavan: That is what the constitutional scheme is that the states have the power. Don’t take away the states power because at no cost should we have a very powerful center. This is the philosophy of our entire country.

Sondhi: In fact, I am more comfortable; I think this is healthier, getting the states involved rather than the ordinance route.

Doshi: However, it still goes against the very opening arguments that all of you made which is that the amendments in themselves dilute a law that was in itself rewritten to make for more fairer acquisition of land.

Sondhi: Agreed and we are assuming here that all the states are going to take the same route.

Doshi: You need three BJP ruled states to start this. If industry starts moving to those three states every other state will feel the competitive pressure to dilute the land law.

Sondhi: My criticism of the substantial changes would remain, but I am saying in terms of a procedure this is a healthier format to follow.

Raghavan: I agree with you.

Srinath: The concern I think is that there is more of a spotlight when things happen in New Delhi. So, there is more discussion, there is more debate. So, my concern is if things move to the states the debate might become weaker. However, I am sure the states can come up with wildly more creative solutions that are not currently being discussed either.

Audience4: Only if states implement different laws can we see how two competing models work so if actually giving states the right to do so will allow us to actually see in the next five years for example, if one state which has implemented the new law if it actually works then maybe other states should adopt it or if like a state that has not implemented the new law and has kept the old law you can actually see the competition between states and you can see which model works better through the state rule.

Audience5: My question was regarding the assumption that if we allow states to legislate knowing that there will be a competition between populist politics as well as the politics of pro-industry and we will be able to know which state is doing better and which isn’t and that would somehow tell us how effective this legislation has been. However, the point of fact being that almost all of the states in this country have had different kinds of developmental trajectories and if we look at most comparisons, you see comparisons being made between Gujarat and let us say West Bengal for example and we see that by virtue of the very nature of their political economy of the state being different they throw up different results. Now, if we are to actually see that kind of power going into the states would we be able to come up with some sort of pan India understanding of what development should it mean or would it again be disaggregated through states?

Doshi: Is your concern that the disparities could in fact widen between states because of such competitive legislations?

Audience5: Yes, because all the state governments have their own populist pressures and that would mean a different set of ways they would interact with it.

Pani: I think going closer to the people is always a good idea as Raghavan said. However, all I am trying to say is that it will be accompanied by inequality, it will be accompanied by regional disparities and you have to address that. It is alright to say I would let this law as kind of real politics today but it is part of a larger process you have to have further initiatives to deal with it. You need to think of fresh solutions, you need to think of ways of getting the industry without having to take land from A and give it to B.